The majority of individual taxpayers in the U.S. are eligible to file their taxes online for free, yet many may be unaware or confused by how to do so.

The tax industry and the IRS have played a part in the problem. Together they run the IRS Free File system, which about 70% of taxpayers are eligible for but only a sliver use. It was designed to help low- and middle-income taxpayers find a reliable program to file at no cost and boost online filings. However, the IRS has long faced criticism for its failure to promote and support the program. And recent media reports uncovered efforts by the tax software preparation industry to misguide users of Free File and nudge them into paid products.

Subsequently, improvements have been made and Free File should be easier to use in 2020. But, with tax season getting into full gear, users should know the details of the service and the alternatives.

WHAT IS FREE FILE?

The IRS Free File program allows taxpayers whose adjusted gross income is $69,000 or less to file for free. Tax software prep companies administer Free File via a partnership with the IRS. This year, taxpayers have their choice of 10 providers, including well-known names such as TurboTax, H&R Block and TaxSlayer.

Free File has been available since 2003; but while roughly 70% of taxpayers are eligible, only about 2% use the program, according to the National Taxpayer Advocate’s Office.

WHY THE LIMITED APPEAL?

FILE- This Feb. 13, 2019, file photo shows multiple forms printed from the Internal Revenue Service web page that are used for 2018 U.S. federal tax returns in Zelienople, Pa. The majority of individual taxpayers in the U.S. are eligible to file their taxes for free, yet many may be unaware or confused by how to do so. Improvements have been made and Free File should be easier to use in 2020. But, with tax season getting into full gear, users should be aware of the details of the service and alternatives. (AP Photo/Keith Srakocic, File)

The majority of individual taxpayers in the U.S. are eligible to file their taxes online for free, yet many may be unaware or confused by how to do so.

The tax industry and the IRS have played a part in the problem. Together they run the IRS Free File system, which about 70% of taxpayers are eligible for but only a sliver use. It was designed to help low- and middle-income taxpayers find a reliable program to file at no cost and boost online filings. However, the IRS has long faced criticism for its failure to promote and support the program. And recent media reports uncovered efforts by the tax software preparation industry to misguide users of Free File and nudge them into paid products.

Subsequently, improvements have been made and Free File should be easier to use in 2020. But, with tax season getting into full gear, users should know the details of the service and the alternatives.

WHAT IS FREE FILE?

The IRS Free File program allows taxpayers whose adjusted gross income is $69,000 or less to file for free. Tax software prep companies administer Free File via a partnership with the IRS. This year, taxpayers have their choice of 10 providers, including well-known names such as TurboTax, H&R Block and TaxSlayer.

Free File has been available since 2003; but while roughly 70% of taxpayers are eligible, only about 2% use the program, according to the National Taxpayer Advocate’s Office.

WHY THE LIMITED APPEAL?

Critics say the program is confusing and difficult to use. The process taxpayers must follow is “obscure and complex,” according to a report released earlier this month by the Treasury Inspector General for Tax Administration.

The program is also poorly promoted. The IRS has not allocated any money to advertise Free File since 2014, although the agency does promote it on its website, social media and in press releases. For their part, some companies say they promote the program. TurboTax said increased advertising and other efforts boosted Free File usage last year.

The Taxpayer Advocate, which represents the taxpayer’s voice within the IRS, has been critical of the IRS’ management of the program, saying it fails “to promote the best interest of taxpayers,” noting the low usage and confusion among taxpayers.

Additionally, critics say taxpayers may find themselves confused between the Free File system and the free or low-cost versions offered by the tax prep companies themselves.

Last year, the nonprofit news organization ProPublica found that some of the companies added code to their websites that hid their Free File programs from search engines and diverted users to paid products. Outside investigations confirmed that at least five companies did have coding that prevented users from getting to the proper page. The companies cited in the reports have denied any wrongdoing.

While the companies’ actions didn’t violate their agreement with the IRS, the agency has barred the companies from hiding their free products, among other changes to their agreement.

The IRS and the Free File Alliance, a coalition of tax prep companies that work in the partnership, say they are committed to making future improvements to the program.

The cost to file online with a tax software preparation company varies depending on the complexity of someone’s tax situation, if they are filing state returns as well, or if they need professional assistance. It can range from around $30 to well over $100.

WHAT SHOULD I DO?

First and foremost, know this: The only way to access Free File is through the IRS website at IRS.gov/freefile.

Changes have been made to the internet search rules but for good reason. Last year, an estimated 14 million people who were eligible for Free File ended up paying to have their taxes prepared and filed, according to the Treasury Inspector General’s report.

By going to the IRS site, taxpayers can browse all the offers or use a tool to help them find the right product. Each program partner has different eligibility standards, but the IRS assures taxpayers that if their adjusted gross income was $69,000 or less, they will find at least one free product to use.

Taxpayers should not be charged any fees if they qualify, other than potential state tax preparation fees. Some programs offer free state filing as well.

Free File partner company websites are also prohibited from pitching and selling additional products to users, including offers of refund anticipation loans, checks or other such products.

However, not everyone qualifies for Free File. So, if you’ve input all your information and find you do not meet the criteria, you may be pointed toward a paid service to complete your taxes.

Not sure if you’ve got the real deal? The IRS also now requires that each company name their Free File service the same way. It should appear as IRS Free File Program delivered by (Company Name).

DO I HAVE TO USE IT?

There are plenty of other alternatives for filing at no cost.

Taxpayers whose income is over $69,000 can use the Free Fillable Forms, which is an electronic version of IRS paper forms. These forms do the math for the taxpayer, but there are limited directions so the user must be comfortable completing their taxes independently. Paper forms, while not a popular option, are completely free as well.

The tax software providers offer their own options and millions of people use these with success. However — unlike Free File — there may be offers for add-on services or upgrades throughout the process that come at a cost. The branded free file options are typically best suited for people with simple tax situations.

The Volunteer Income Tax Assistance Program and Tax Counseling for the Elderly programs also both offer free tax filing assistance through volunteer-run programs nationwide. VITA offers free tax help to moderate and low-income individuals, as well as people with disabilities or taxpayers with limited English skills. TCE focuses on helping taxpayers who are 60 years or older.

To find a VITA or TCE site, check the IRS website. The AARP Foundation runs many of the TCE sites and has information on its website as well.

Members of the military can use Military OneSource, a Department of Defense funded service that provides free online filing services through MilTax. MilTax includes access to tax prep software and support from tax consultants who can help with the unique conditions facing those in the military, including deployment, combat pay and multistate filings.

Do it today, tomorrow may never come!

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Post by GlennD on Feb 14, 2020 11:29:32 GMT -5

The arrogant, snowflake assumption here is that every low income taxpayer has a modern computer, a high speed internet connection, and knows how to use it. My experience has been that many low income people in this country, and particularly the elderly, can't operate the TV remote let alone a computer, the Internet, and tax preparation software.

The Government already gets a copy of all tax relevant documents for most people. About the only question they need to ask is marital status and number of dependents. Send them a bill or a refund check.

Accountants and tax preparation software should only be needed by taxpayers with complex returns that include lots of income and expenses from business, investments, etc..

Post by Loggy on Feb 14, 2020 13:41:35 GMT -5

The IRS has offered FREE walk-in tax preparation/assistance service for as long as I can remember. It's called VITA(Volunteer Income Tax Assistance). I know it was offered every one of my 36 years I was with the Service. NO NEED TO OWN OR KNOW HOW TO OPERATE A COMPUTER!! VITA availability is no secret & is highly publicized via local newspapers, radio, TV, Senior Centers, many gov offices, schools etc etc etc. SEE link below:

Post by davet on Feb 14, 2020 13:43:27 GMT -5

Free tax filing for the Military....along with free professional advice.....plus free State filings is a great thing IMHO. I know nothing about the military filing program, but if it's all true....it's a good thing. Military individuals are very unique in what is and is not taxable for Federal, plus they can elect a "home state" for State income tax. Then it depends IIRC on how long they have been deployed for other options to kick in.

Anyone with a simple return such as interest\dividend income and a W-2 should be free and easy to file. When the taxpayer has other items such as stock sales and\or mutual fund sales then it can get a tiny bit complex. Self-employed individuals is a whole 'nother level of complexity along with Partnerships, certain LLC's\LLP's, and S-Corporations. They all have their sometimes "funky and different" rules to contend with.

But for the small guy, it should be easy. OTOH......as a one-time tax professional, the small ones are easy. But for some people, even easy is to complex to attempt to try. That's why you have outfits like H&R, Jackson Hewitt and the like. IMHO it's those "quick 'n dirty" outfits that tell you they will advance you your refund with "no interest".....then turn around and charge a "loan fee" along with a tax prep fee, and also an e-filing fee. I mean really......those guys really take advantage of those who "don't know" and IMHO use scare tactics such as "We deal with the IRS...not you" or "What if your e-file refund takes longer than 7 days? What will you do?" That's a bunch of BS rip-off the little guy stuff.

Post by GlennD on Feb 14, 2020 16:33:00 GMT -5

The IRS has offered FREE walk-in tax preparation/assistance service for as long as I can remember. It's called VITA(Volunteer Income Tax Assistance). I know it was offered every one of my 36 years I was with the Service. NO NEED TO OWN OR KNOW HOW TO OPERATE A COMPUTER!! VITA availability is no secret & is highly publicized via local newspapers, radio, TV, Senior Centers, many gov offices, schools etc etc etc. SEE link below:

Well I be. Here I am 58 years into preparing my own returns and I never heard of VITA. Imagine that.. I am going to post this on Facebook and ask my friends how many know of it.. Be interesting to see.

Post by Loggy on Feb 14, 2020 16:48:35 GMT -5

The IRS has offered FREE walk-in tax preparation/assistance service for as long as I can remember. It's called VITA(Volunteer Income Tax Assistance). I know it was offered every one of my 36 years I was with the Service. NO NEED TO OWN OR KNOW HOW TO OPERATE A COMPUTER!! VITA availability is no secret & is highly publicized via local newspapers, radio, TV, Senior Centers, many gov offices, schools etc etc etc. SEE link below:

Well I be. Here I am 58 years into preparing my own returns and I never heard of VITA. Imagine that.. I am going to post this on Facebook and ask my friends how many know of it.. Be interesting to see.

By darn Glenn....I was sure under the wrong impression about your financial position!! Was thinkin you would definitely NOT be in the class of taxpayers who would be seeking VITA assistance or seeking out such info. Glad I informed you in case you could benefit from such assistance. Oh wait...I think you can punch puter keys so mebbie other available freebies mentioned above would work for you. OH BTW...in case you read the instruction info in preparing your return I think there's a VITA reference there! Form 1040 Instructions

Post by Loggy on Feb 15, 2020 9:04:01 GMT -5

Hafta check them out sometime Glenn. Some good stuff in there like changes in tax law affecting your returns filing and even a few mentions of the IRS VITA Program!! You can pick-up a lot of what could help you within the first 6 pages( What's New) and Pages 7-8(Filing Requirements).